A couple of thoughts on Standard & Poor’s downgrade of US debt regarding, first, US defense spending, second, my suspicion of insider trading, and third, the illusion of unregulated markets.

First, concerning China’s reference to our “gigantic military expenditure.” I had been surprised, during the deficit ceiling debates, by the relative lack of attention to defense spending—not surprised politically, obviously, more surprised in the rhetorical kind-of-way. In an earlier post, I had remarked on the similar silence about prison spending in the earlier round of deficit reduction debates. But of course, federal spending on prisons remains relatively small as a proportion of the overall budget ($6.8 billion); most expenditures are at the state level (where they rise to over $47 billion annually).

Defense spending, on the other hand, represents about 20% of the federal budget and 50% of the discretionary portion of the budget—one would have thought it would have been a more salient issue. We’re spending more on defense than we’ve ever spent since World War II and the USA has grown now to represent 50% of the world’s military spending. There is an excellent report detailing this from the Center for American Progress.

While it is true that proportionally less of our tax dollars are going to defense spending now than in the 1960s, the statistics surrounding defense spending are somewhat staggering. I did a quick look at the numbers, and they are impressive. In terms of comparisons of spending, in constant 2009 US$, the numbers for 2010 are as follows:

(I obtained this data from the Stockholm Intl. Peace Research Institute, a think-tank that researches international security. You can view them here. I am using the SIPRI because it lists each country's defense spending according to amount spent. I verified the data with http://www.cbo.gov/, the United States Congressional Budget Office. For the United States, the SIPRI gave 687,105,000,000 while the CBO gave 689.1 billion).

In terms of per capita defense spending data, the comparison looks like this (again, the data come from the SIPRI (2009)):

It is interesting to note in this regard that President Obama’s administration plans to spend more, about 20 percent more, than the previous Bush administration on defense. On that score, though, it is impressive to see how much the Wars in Iraq and Afghanistan have contributed to the national deficit. It is reflected well in the graph of presidential contributions to the $14.3 trillion dollars, with President George W. Bush’s contribution being $6.1 trillion. This graph from the New York Times is one of the most interesting graphs produced during the debt ceiling debates:

Second, I suspect that the 5% drop in the markets this past Thursday was triggered by insider trading among large institutional investors. I’m assuming, of course, contra-Chicago School thinking, that the S&P downgrade would affect the markets—in other words, that just because all the information on which S&P based it’s decision was already factored into the market price, the very fact of the downgrade itself would have an adverse psychological affect on the market. (We’ll see on Monday). But in rereading the front page of Friday’s New York Times in the faculty lounge this morning, it just struck me that all this talk of “Thursday’s painful rout” being caused by “anxiety that both Europe and the United States were failing to fix deepening economic problems” was probably nonsense. The rout was probably, I suspect, the result of insider information circulating about S&P’s decision to downgrade. S&P sent their announcement to the Treasury before the markets closed on Friday—but the information must, I suspect, have leaked out a few days before.

Third, insofar as the intransigence of the Republican House members on revenues contributed to the S&P downgrade, it is important to reemphasize, in all these debates, that the idea that we can eliminate "the state" and forms of economic regulation and administration of markets is a fantasy with dangerous consequences. I have been writing about this in relation to my new book, The Illusion of Free Markets (Harvard 2011), but it never ceases to amaze me how the illusion persists.

Reading S&P's own explanation of the downgrade, it appears that Democratic intransigence on the subject of spending cuts had every bit as much to do with the downgrade as Republican intransigence on tax increases; They don't so much care how we get our fiscal house in order, as that we do. Spending cuts, tax increases, either would have done.

why would information regarding a potential downgrade cause the stock market to fall and the bond market to rise? Logically, it would seem that the impact of a downgrade would be for people to sell Treasuries and either keep the proceeds in cash or use them to buy something else (maybe corporate bonds).

1) China has a vested interest in reducing our military spending and thus our reach into Asia. That being said, military spending has been on the table since the beginning and is a major component of what are admittedly minuscule spending cuts in the debt ceiling deal. To balance the budget in the future, the US will have to wind down the wars and reduce our force structure to a 1 to 1.5 war force.

2) The Thursday market correction had nothing to do with the S&P downgrade. Indeed, the downgrade probably won't affect T-Bill yields significantly because we are still the only place to park large amounts of money in relative safety with the EU flirting with mass mass sovereign insolvency and the other major powers not following the example of this administration's insane borrowing and spending.

3) Given that our financial market regulators gave use the subprime home mortgage crash and nearly doubled the money supply since 2008, dramatically diminishing their power might not be a bad thing at all.

I don't know how much investment experience mls has, but "logically" is not central to stock market performance. When equities go up or down, some reason or reasons are instantaneously provided that may or may not be so. Do we have an efficient stock market? Or do we rely upon the explanatory expertise of our yodeler, who seems to be hinting at deregulation?

Agreed, China has an independent motive for wanting us to reduce our military expenditures. That doesn't mean that our military expenditures aren't totally excessive. Europe long since recovered from WWII, they can shoulder their share of the burden now.

Fact is, we're suffering from an increasingly bad case of imperial over-reach, regardless of whether China would like to take over some of that 'empire'.

The markets are justifiably scared of the potential defaults of Spain and especially Italy trashing the EU banks, followed secondarily with our economy sliding from stagnanttion to recession.

The unemployment numbers were awful for July. The U3 unemployment percentage went down because our employment as a percentage of population shrunk to its worst point since 1983, when far more women were out of the workforce tending households and were still in the 80-82 double dip recession. The unemployed are leaving the workforce entirely and new adults are avoiding joining it by staying in school.

Now our yodeler is an expert on the market. In a sense, our yodeler can be compared to S & P. Consider that our yodeler was swimming in what he now calls the GOP sewer of the Bush/Cheney 8 years, extolling that Administration, never expressing any problems with it. Compare this to S & P and its gradings regarding subprimes that contributed to the 2008 Bush/Cheney Great Recession; while S & P admitted "mistakes were made," it held its head up higher than its integrity. At least our yodeler realized at some point (I would guess on 1/20/09) that the GOP that he supported lock, stock and barrel was a sewer. S & P now tries to reestablish its credentials with the downgrading from AAA to AA+ and threatens further downgrades even after owning up to mistakes in its calculations. So who can really have trust and confidence in either S & P or our yodeler based upon past (un)performance when it comes to the economy and the markets? To his credit, our yodeler got out of the GOP sewer after 8 stenchful years but jumped into the hot water of the Tea Party, yet our yodeler cannot cleanse himself of the sewer scum, and the Tea Party seems spent at this point. To our yodeler the debt credit ceiling brouhaha played no role in the big market drop, with him placing much of the blame on Italy and Spain and their impact on Europe. But he knows deep down that we're now in the 2011 Tea Party Great Recession.

Who can forget our yodeler's portfolio advice during he Bush/Cheney crash of 2008? Perhaps someone with more energy than an 80 year old senile fogie can check the archives at this Blog while I check under my mattress to make sure I can still afford an occasional Bombay gin and tonic, with a wedge of lime of course, to thwart malaria and scurvy while getting high.

As for explanations why the big market drop, just check the NYTimes Business Day for multiple causes.

This is hardly limited to S&P. The Chinese debt agency downgraded the US last week. Every western rating agency has threatened to do so over the past two months. Moody's kept the AAA with a warning on Friday. Others are still deciding.

Its time you Dems faced reality. You cannot keep borrowing $1.8 trillion per year to finance 40% of the federal government's spending. This is like being unemployed and living on credit cards. The US will hit Greek insolvency levels in less than a decade at this rate and start being downgraded towards junk long before then.

Even if you looted the entire income of the top 2% (who are already paying over 30% of the tax burden now) you would not get close to balancing the budget. To pay your present spending bills you would have to double the current taxes on the middle class.

When given the choice between raising their own taxes and reversing the Bush 43 and Obama spending spree of the past decade, one guess which course the middle class would choose.

Either end the crack party now or destroy the federal government. There is no third way.

although he gleefully swam in that GOP sewer of Bush/Cheney for 8 years without complaint but with praise. Obama inherited the big hole that Bush/Cheney left behind - that our yodeler left for warmth of the Tea Putz - and wants to put the onus on Obama. Our yodeler and his ilk promptly beginning 1/20/09 did what they could to thwart Obama, taking the country to the brink. Our yodeler has no credibility whatsoever on economic issues based upon his GOP Bush/Cheney sewer days. But he prattles on, blaming Obama and the Democrats for just about anything that takes place of a negative nature. Is Obama responsible for Greece, Ireland, Iceland, Spain, Italy and the rest of the EU's problems? Remember, the 2008 Great Recession came about on the Bush/Cheney watch. And what China says should govern our economy? I think our yodeler is on crack. Taking financial advice from him would lead to bankruptcy.

There were certainly leaks to investors earlier in the week. Query though for securities types, would that constitute insider trading in the legal sense?

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Regarding S&P actions they make no sense at all. A country with debts denominated in its own currency cannot default (well except as a willfull act of spite). The real return on its debts can be sharply reduced through inflation, which might in extremis be considered a kind of default. But if that were really S&P's concern that every dollar denominated instrument should have been downgraded at the same time.

Recall in 2002 when Dick Cheney of the infamous Bush/Cheney "Die-Namic Duo" said "Deficits don't matter" as a second tax cut was being planned at the same time we were in Afghanistan and ready to go into Iraq, relying upon the economic "standard" set by Ronald Reagan in support? Who was it at this Blog who challenged this? Was it our now Tea Party crusader? No, he was too busy swimming in what he now calls the GOP sewer of Bush/Cheney for its 8 years. A check of the archives at this Blog will confirm this. I challenge our yodeler to cite from the annals of this Blog any challenge he made while he was in the swim with Bush/Cheney. Our yodeler's sole focus from 1/20/09 has been his vile hatred of Obama, his raison d'etre. Our yodeler's attempts to separate himself from the Bush/Cheney 8 years are futile as the record is clear here at this Blog that during those Bush/Cheney 8 years, our yodeler swallowed some of that sewer water and there isn't enough hot tea to purge it.

And let me repeat a description of our yodeler that I have provided in the past regarding his economic/financial situation. Some years back funding for Boston's Franklin Park Zoo resulted in budget cuts. Our yodeler is like the snakes in the Zoo: he doesn't have a pit to hiss in. Yet he defends the super wealthy's low tax rates. As Bugs Bunny would say: "What a maroon."

"Regarding S&P actions they make no sense at all. A country with debts denominated in its own currency cannot default (well except as a willfull act of spite)."

I've heard that bit of rationalization from liberals a lot in the last few weeks. Of course, strictly defined default isn't the only thing you have to fear in the case of a sovereign debtor.

Inflation, of course, is one traditional route, and S&P only downgraded long term debt. Indeed, if all things were equal, the expectation of inflation ought to result in all dollar denominated debt being equally downgraded. But all things are not equal.

As a sovereign, the US has a wide arsenal of ways, limited only by the imagination of lawmakers, to cheat it's creditors. And should it do so, less reason to fear it's creditors. What are they going to do, take it to court?

For instance, nothing but a sense of shame stops the federal government from imposing a rather large tax on earnings in the form of federal bond payoffs, and deducting this tax when it 'pays off' the bonds.

So, once you have reason to suppose that a sovereign will want to cheat it's creditors, you have a lot more to worry about than you do in the case of private sector debtors. They've got more ways to cheat you, and you have far fewer options if they do.

And, of curse, willful acts of spite are hardly unheard of, where the government is concerned. The term "clawback" ring any bells?

For those who wish to understand what happens in the stock market, especially with events of the past week, the NYTimes Sunday Business Section today features Julie Cresswell's "Pressing All the Buttons For a Panic Attack." I've been in the stock market since the 1960s and it has served me well, even though I am not a trader. I urge mls to read it to address his concern with logic and the stock market.

I'll leave it to others to address the inanities of Brett, especially where he apparently does not favor clawbacks that would include activities of Bernie Madoff and others on Wall Street that led to the 2008 Bush/Cheney Great Recession. Those who engage in fraud deserve being clawed-back. MEOW!

Why, that's right, I think retroactive changes in tax laws, such as used to rob AIG employees, are violations of the ex post facto clause, if it were being interpreted in good faith. Basically what happened there was that the government demonized some people, and then robbed them.

BD: "I opposed all the Bush 43 spending increases that were not dedicated to war fighting."

JosephR said...Considering the obscene amounts of money Bush 43 spent on unnecessary wars and the associated waste, fraud and abuse, to have opposed everything but his war spending doesn't testify to much restraint.

We spent less on winning the Iraq War than Obama borrowed and spent in the first five months of FY2011, and that was a one time expenditure not repeated endlessly in the government baseline.

Bush 43 raised domestic spending by over a quarter and increased the size of the military. That is what is built into the baseline deficit.

Our yodeler seems to be preparing to dive back into the GOP Bush/Cheney sewer, probably to join over half of the House Tea Party caucus that voted FOR the debt ceiling increase.

And now he does his Chicken Little imitation on what S & P threatens. As I noted earlier, our yodeler and S & P have something in common - they're past failures. So our yodeler now turns in desperation to Paul Ryan, who has been discredited by much of the GOP. These are desperate times for our yodeler as he shifts direction with the winds of S & P, China, Greece, Ireland, Iceland, Spain, Italy, the kitchen sink.

And our yodeler uses the "slippery slope" of S & P's drop of one notch from AAA to AA+. As the French Bugs Bunny would say: "Quelle maroon!" Our yodeler is like a Jim Cramer on steroids.

The corporate-financial world has to reach an understanding with the military in order to continue their takeover of what used to be called government. They are not natural allies. They are far more now than ever before as most every retiring general enters the corporate world but still their goals are different.

The military's goals in the end are for The Nation. The Nation is a quaint concept that the corporate world is abandoning. It seems almost inevitable that soon all presidents will come from the military but that can't happen until corporate power is comfortable that the military will defer to them on economic matters.

Our national tax burden is relatively small compared with other socialist and progressive welfare nations because our states form much of our government and we do not tax our middle class nearly as high as they do. The latter point is particularly important for the discussion of how to balance the budget.

CBO took a look at the distribution of all federal taxes (income, corporate, withholding and excise) in 2006 and found the US federal tax code is completely skewed to a relatively few people at the top - where the percentage of the tax burden borne by these citizens substantially exceeds their percentage of the total national income:

The top 1% of earners earned 19% of total income, but paid 28% of all taxes under an effective total federal tax rate of 31%.

The top quintile of earners earned 56% of total income, but paid 69% of all taxes under an effective total federal tax rate of 26%.

CBO dispelled the common wisdom that the middle class bears most of the tax burden. In fact, the percentage of the tax burden borne by these citizens is consistently and often substantially less than their percentage of the total national income:

The second quintile of earners (upper middle class) earned 19% of total income, but paid 16% of all taxes under an effective total federal tax rate of 17%.

The third quintile of earners (middle middle class) earned 13% of total income, but paid 9% of all taxes under an effective total federal tax rate of 14%.

The fourth quintile of earners (lower middle class) earned 8% of total income, but paid 4% of all taxes under an effective total federal tax rate of 10%.

The poor pay nearly no net taxes as government EITC subsidies cover most of their withholding taxes for Social Security and Medicare:

The fifth quintile of earners earned 4% of total income, but paid 1% of all taxes under an effective total federal tax rate of 4%.

(The percentages are rounded off to full numbers, so the totals may be above or below 100%).

As I noted in a post above, we would have to double the tax on our middle class to pay for Barack Obama and the Dems spending at 25% of GDP. And as I also noted, the American middle class - which is the home of and largely dominated by the Tea Party - wants none of of it.

BD: " And as I also noted, the American middle class - which is the home of and largely dominated by the Tea Party - ...."

"Largely dominated?

Largely dominated.

Go to my blog and search for "Tea Party." I have a couple dozen posts breaking down the various polling and exit polling of the Tea Party supporter demographics.

The Tea Party is a middle America, middle class movement with very few wealthy. They make up roughly a third of the citizenry in polls that are not heavily skewed Dem. A third of the citizenry inside the middle class largely dominates the middle class.

I dedicate a chapter in my upcoming book to this middle class rebellion against Obama's socialist policies. BTW, the publication date for the book looks more like October than September. Much of my competition in our rural county has gone out of business during the Obama Great Recession and my firm has become rather busy. My second job as a writer/publisher has had to take a second seat.

" Much of my competition in our rural county has gone out of business during the Obama Great Recession and my firm has become rather busy. My second job as a writer/publisher has had to take a second seat."

demonstrates how completely whacko he has gotten. Who would compete with his vileness and hatred? And note how it is no longer the Bush/Cheney 2008 Great Recession. His second job as a writer/publisher? In reality his full time job going back to 1/20/09 has been to spew his hatred of Obama. I'm currently rereading Kurt Vonnegut's novel "Mother Night" with its lead character Howard W. Campbell, Jr., and guess who I am reminded of? If they made an Olympic event of sewer swimming, our yodeler would get the gold. {Maybe that last sentence could serve as a blurb for his work of "Friction" no longer scheduled for 9/11/11 but now October.]

"A third of the citizenry [i.e., Tea Party members] inside the middle class largely dominates the middle class."

exceeds wild exaggeration, even assuming the one-third claim were correct.

And our yodeler now claims to be the DUI legal oligarch in his rural county. What an honor, representing alleged drunks.

And add writer/publisher to his resume. One is amazed at his multi-tasking skills that include his own blog and his prolific comments at this Blog (and who knows elsewhere). His DUI clients must be thrilled.

As to the publication of our yodeler's work of "Friction," planned to be self-published on 9/11/11, we now listen to his "September Song":

****

Oh, it's a long, long while from May to DecemberBut the days grow short when you reach SeptemberWhen the autumn weather turns the leaves to flameOne hasn't got time for the waiting gameOh, the days dwindle down to a precious fewSeptember, November ...."

****

Contest: How would an Italian Bugs Bunny say: "What a maroon!"? The winner will get a free copy of our yodeler's work of "Friction," the runner up will get two free copies.

I was looking at the SIPRI data, and had a couple of questions. First, it is unclear how/whether the data includes our nuclear weapons complex, much of which resides in DOE's budget. Also, SIPRI's figures exclude the following, according to their definitions page:

Excluded military related expenditures: civil defence current expenditure for previous military activities veterans benefits demobilization conversion of arms production facilities destruction of weapons

Most of those exclusions are huge expenses in the US -- and if included, skew the US numbers even further.

"Capital gains have been taxed below other income for years before Bush because you do not get a deduction for capital losses. Everyone with real property or investments enjoys this rate."

seems to have been tarnished by the GOP Bush/Cheney sewer that he wallowed in for 8 years. Capital losses serve as an offset to capital gains, with a limited portion of any excess of the losses over the gains being available for direct deduction, with the further excess of losses available by carryover to later years to offset gains in those years. Our yodeler's advice is taxing. And he has no legal competition in his rural community?

It is self evident that a capital loss means there is no capital gain to be taxed. However, what capital losses can be used as a deduction to offset other income?

I am discussing the general theory of capital gains taxation. That does not mean that you are not correct and Congress snuck in some provision creating an capital gains loss deduction into our incomprehensible tax code.

"I am discussing the general theory of capital gains taxation. That does not mean that you are not correct and Congress snuck in some provision creating an capital gains loss deduction into our incomprehensible tax code."

Snuck in? My federal income tax course was so long ago it was dealing with the 1939 tax code. When I finished law school in 1954, we had the 1954 tax code. There have been many changes in the tax laws since. But capital losses were not snuck in. They have been around a long time. Capital gain/loss tax rules are not incomprehensible. What is incomprehensible is our yodeler. Can you imagine what was the caliber of the legal competition he conquered in his rural community to become top legal dog?

By the Bybee [expletives deleted], I'm almost through my reread of Kurt Vonnegut's "Mother Night." Its "hero," Howard W. Campbell, Jr. still reminds of you know whom.

D. Ghirlandaio said...Amazing how little Bart trusts the market. Interest on five-year Treasuries is now 1.25% And my portfolio is down more than 3 years of Bart's income.

Umm... I told you the downgrade would not affect T-Bill yields and why in my opening post:

Bart DePalma said...Indeed, the downgrade probably won't affect T-Bill yields significantly because we are still the only place to park large amounts of money in relative safety with the EU flirting with mass mass sovereign insolvency and the other major powers not following the example of this administration's insane borrowing and spending.

Once the correction in the market finishes, I am back into stocks this week.

Nate Silver makes a good point - S&P is usually slow to downgrade sovereign debt ratings - which suggests that they probably should have dinged the United States back in 2010 when it became clear that the 2009 borrow and spending spree was going to be an ongoing problem with this Administration and not a one time "stimulus."

Still, S&P did call out the US early enough for our government (or more likely a new one in 2013) to change course before it is too late. If S&P had called out the PIIGS countries as early as it has done the United States, these nations might have corrected their profligacy before charging to the precipice of sovereign insolvency.

Even the idiots at S&P mentioned the teabagger idiocy on Bush's tax cuts.

Krugman states the obvious: "[T]he United States has far higher health costs than any other advanced country, and very low taxes by international standards. If we could move even part way toward international norms on both these fronts, our budget problems would be solved."

You're against modernizing health care to match the rest of the developed world, you're opposed to the end of Bush's cuts, and you're in favor of eternal war

Our yodeler is apparently unfamiliar with Schedule D of IRS form 1040, in particular line 16 and then line 21 which limits to a maximum of $3,000 (or $1,500 if married filing separately) net capital losses then available as a deduction on line 13 of form 1040. Perhaps the legal fraternity in our yodeler's rural community doesn't get involved with capital gains/losses. Or our yodeler is such an astute investor, he never had to deal with a capital loss.

At one point, someone said, "there is no third way." It puts me in mind of the "protagonist" of Heinrich Mann's Man without Qualities. I think you would find the treatment so spot on that I recommend you read it if you haven't already.

Blaming the Tea Party for the Obama Administration's credit rating downgrade is like blaming the parents of a spendthrift child when the child trashes his credit rating after maxing out his credit cards because the parents told the child to stop spending instead of agreeing to pay the child's credit card bills.

Shag:

I am not a tax attorney or CPA. Please stop playing games and explain the tax deduction to which you keep referring.

Indeed, the downgrade probably won't affect T-Bill yields significantly because we are still the only place to park large amounts of money in relative safety with the EU flirting with mass mass sovereign insolvency and the other major powers not following the example of this administration's insane borrowing and spending.

Bart, since you quoted yourself, presumably you have some grasp of what you wrote. But how does "other major powers" following, by your account, more fiscally sound policies than the US make US debt appear "safer" to investors???

BD: Indeed, the downgrade probably won't affect T-Bill yields significantly because we are still the only place to park large amounts of money in relative safety with the EU flirting with mass mass sovereign insolvency and the other major powers not following the example of this administration's insane borrowing and spending.

mattski said...Bart, since you quoted yourself, presumably you have some grasp of what you wrote. But how does "other major powers" following, by your account, more fiscally sound policies than the US make US debt appear "safer" to investors???

That portion of my comment refers to the availability of a place to park money, not the safety of the location.

Investors are looking for a relatively safe place to shelter large amounts of capital leaving equity markets because of fear of a second dip in the Great Recession.

The EU debtor nations are being reduced to junk status, so they cannot provide a safe harbor.

More creditworthy powers like Germany and China are not providing a harbor at all because they are not profligately borrowing.

That leaves the United States as the only remaining debtor nation both borrowing enough money to shelter the capital and offering the least risk in doing so.

S&P said the changes could come from a combination of spending cuts and revenue increases. If party A wanted revenue increases and party B wants spending cuts and party A meets party B halfway by approving spending cuts, party B is expected to approve minor revenue increases (assuming they are negotiating in good faith)

If party B absolutely refuses, then yes, it is that party's fault, because they are catering solely to their own electorate, and not the wishes of the people at large.

Let's say a taxpayer in 2010 sold a stock resulting in a capital loss of $4,000; that the taxpayer had no other capital gains or losses in 2010. The taxpayer would have a net capital loss of $4,000 that would end up on line 16 of Schedule D 1040. Line 21 would provide for only $3,000 of that loss. (I am assuming that the taxpayer if married is not filing separately.) This loss of $3,000 would be noted on line 13 of form 1040 (bracketed to show a loss) and thus serve as a deduction against other income in determining adjusted gross income for 2010. With respect to $1,000 of the $4,000 loss not available for deduction in 2010, it may be available in 2011 or subsequent years to offset capital gains in subsequent years. This is a simple explanation. One doesn't have to be a tax attorney or CPA to understand this. For more information, take a look at the Instructions for Schedule D and a specific IRS Publication on sales and exchanges. (Not all losses are considered capital losses, e.g. on the sale of a personal residence or personal auto, although gains on such a sale would be considered capital gains, either long or short term depending upon the period held before sale or exchange.)

"like blaming the parents of a spendthrift child "See "Zombie... Lies", above (that's two links).Here's another You're a parody of a something, but I'm not sure what. You're lying to yourself first at least.

Also regarding the earlier link to world tax rates read the second comment there, on Denmark; though I think it's been overtaken by Norway on the scale of self-reported happiness.

I want to avoid giving tax advice to our yodeler or others. With a little Googling, the information our yodeler inquires of can be readily obtained, especially with the Instructions to Schedule D of form 1040 and IRS Publication 544 readily available via the IRS website. What constitutes a capital asset is explained in Publication 544. A personal residence is an asset and its sale at a gain is treated as a capital gain, but a loss would not be treated as a capital loss. The sale or exchange of business real estate can result in a capital gain or capital loss. The sale or exchange of mutual funds can result in a capital gain or a capital loss; likewise gold. But IRAs call for special treatment as sales or exchanges of capital assets in an IRA are not subject to taxation as capital assets; IRAs result in taxes upon distributions at ordinary income rates; but there are many tax complexities associated with IRAs, including required minimum annual distributions per a formula when the taxpayer hits 70 1/2 years of age, with potential penalties imposed for failing to make such distributions. There are IRS Publications on all of these matters available via the IRS website. Not all tax law is rocket science.

In his speech today, President Obama sent just about every signal possible to the markets that he has no intention whatsoever of dealing with his rampant borrowing and spending.

http://www.youtube.com/watch?v=tUhIOQDPnP8

Obama called the debt a long term problem which presents no immediate danger.

Obama stated that no more can be cut from any part of the government except for "modest changes" to Medicare.

Obama again called for unnamed tax increases. The tax increase trial balloons the Dems floated during the debt ceiling debate like fiddling with the corporate jet depreciation schedule and withdrawing tax breaks for oil exploration (but not for "clean energy") would bring in next to no revenues.

After Obama's 1 pm remarks, the DJIA fell another 328 points and the futures at this moment are down another 100 points.

Obama is ineptly handing the GOP a golden opportunity in the imminent FY2012 budget battle. The GOP should point to the S&P rating, the markets and he economy and propose fundamental reform to save them all.

I note that Jonah (Yet-to-be-weaned) Goldberg in his LATimes column seems so concerned with the effectiveness of tagging the stock market slump on the tail of the Tea Party that he attempts to neutralize this by conceding that the Tea Party and others made mistakes. I expect our yodeler to take Jonah to the woodshed for whatever.* Maybe we can expect a Rodney King conversion of Jonah: "Can't we all just get along?"

As to the the efficacy of blaming the stock market correction or any other establishment failure of the day on a decentralized popular movement like the Tea Party, I would recommend you read The Starfish and the Spider.

Saul Alinsky's most popular technique to attack an organization was to make a person the face of that organization and the destroy that person. Alinsky correctly observed that attacking a faceless organization does not work. The problem that the Tea Party presents the Dem left is that it is a decentralized leaderless movement and the politics of personal destruction do not work. You folks have been trying since the summer of 2010.

Indeed, like certain species of starfish, if you try to chop up the Tea Party, you simply end up with more and angrier Tea Party.

What a coincidence: starfish are also bottom feeders like the ilk of our yodeler. But a chopped up Tea Party will end up as chum: devoured. And non-Tea Party Republican elected officials will have to take strenuous efforts to separate themselves from the Tea Party. Consider Speaker Bo(eh)ner's braggadocio statement after the debt ceiling bill was enacted that he got "98 %" of what he wanted. So consider the use of this in addressing the 2011 Tea Party recession. Bo(eh)ner should be careful about what he wants: look at the aftermath. I'm working on a bumper sticker:

The Tea Party's top concern is the economy in every single poll. Our second concern is the government saddling us with unrepeatable debt and midterm sovereign insolvency.

We in the Tea Party and indeed a majority of the country realize that borrowing and spending is an expensive policy that utterly failed to create economic growth and jobs. The left minority are the only folks who think this "animal spirit" economics works.

Given your complete ignorance of the Tea Party movement outside of the equally ignorant spin you read coming from the Dem media, at least check out some polling before you insert foot into mouth the next time.

Voter approval of the job Congress is doing has fallen to a new low – for the second month in a row. Only six percent (6%) now rate Congress’ performance as good or excellent.

This is not surprising at all. A majority of voters lent Congress to the GOP in 2010 with an unmistakeable mandate to stop the borrowing and spending. They have done next to nothing to carry out that mandate.

A minority of voters in 2010 sent their Dems back to Congress to keep the government pig trough filled and they are pissed because one slop bucket was withheld.

But WHO is "playing with fire" Bart? I mean, WTF are you talking about?

A repudiation election in 2012 that makes the 2010 tsunami election appear like another day at the beach.

If you are genuinely curious about what I am talking about, go to my blog and read the posts on the polling over the past three months when Obama completely lost the center. These numbers are far worse that what Carter suffered under in 1979. I suspect, this summer was a turning point.

So by all means please continue calling the people terrorists, lunatics and chum.

So by all means please continue calling the people terrorists, lunatics and chum.

Bart, I tip my hat to your civil language here. And it's nice to know that by "playing with fire" you're referring to electoral fire. Thanks for that.

But the fact that you're ready to shout "impeachment" over the idea that the president, in the event of a Tea Party induced default, might not be able to pay all the government's bills pretty much shows what the deal is vis-a-vis lunacy.

It was Tea Party quacks like Austin Scott who brought this nation to the brink of default. It is know-nothing quacks like Sharron "2nd amendment solutions" Angle--thank god she lost--who justifiably besmirch the hard-right's reputation.

Here's a thought: What if Speaker Bo(eh)ner had gotten 100% of what he wanted? What result?

As for our yodeler's running diatribe since 1/20/09, clearly it is hyping for his upchucking work of "Friction" on Obama the Socialist that he started writing on that date. Despite his claims of getting rid of the legal competition in his rural community, his DUI specialty is obviously drying up and his book, in his eyes, is his ticket to celebrity and fortune. As our yodeler has informed us, he will be self publishing, a form of literary masturbation that is not very successful. But environmentally it will save a lot of trees. Why self publication? I know a little bit about literary agents, publishing houses, editors, etc, and no doubt he would have difficulty with the conventional route to publishing that includes fact checking. Such professionals would no doubt learn of our yodeler's efforts at this Blog and others to learn what makes him tick and to learn of his inconsistencies and outright fabrications.

Nobody's taken up my offer on what an Italian Bugs Bunny would say about our yodeler. So let's double the prizes: The winner gets two (2) free copies of our yodeler's Obama the Socialist and the runner up gets four (4). (Query: might there be a greater response for a German Bugs Bunny?)

GOP polling 12 points worse than Democratic Party. So maybe it's not as bad for us as you say, Bart.

Whether a voter approves of a party and whether she will cast her vote for that party over the other party are two different issues.

The Tea Party disapproves of the GOP establishment almost as much as it does the Dem establishment. Given that the Tea Party largely consists of GOP voters, this is why GOP approval polls at the same level as whale shit while the Dem base continues to approve of its party like lemmings.

The Tea Party's electoral strategy is not to vote Dem or third party, but rather to primary RINOs and then vote for its GOP nominees in the general election.

In short, the GOP House and Senate caucuses may look different in 2012, but we will still elect them to majorities next year.

The Obama and Senate Dems' seeming caves on raising taxes and defending spending last December and a couple weeks are a vain attempt to mollify Tea Party voters before the 2012 election.

Nobody's taken up my offer on what an Italian Bugs Bunny would say about our yodeler. So let's double the prizes: The winner gets two (2) free copies of our yodeler's Obama the Socialist and the runner up gets four (4). (Query: might there be a greater response for a German Bugs Bunny?)# posted by Shag from Brookline : 1:58 PM

That was then and this is now. Currently, Obama has free fallen to 40% approve v. 50% disapprove in national polling. Thus, if Obama's state-by-state average has fallen off by 7 points like his national average, he would be lucky to match Jimmy Carter' electoral vote total in 1980 if the election were held today.

Actually Bush was the only reelected President below 50% on the eve of the election with a 48%, but this was likely an outlier because he was comfortably above 50% the week before and the week after that poll.

By way of Wikipedia based upon the 2000 census, our yodeler's rural community includes the following demographic:

" ... The racial makeup of the city was 94.89% White, 0.52% African American, 0.72% Native American, 0.87% Asian, 0.81% from other races, and 2.18% from two or more races. Hispanic or Latino of any race were 3.45% of the population."